My credit card minimum payment’s gone up. Why?

You’ve been making payments on your credit card every month without fail. However, you’ve just got a letter from your credit card provider saying they’re going to increase your monthly repayment, or suggested you do so. Why?

If you’ve been paying more in interest and charges than the balance for 18 months or longer, this is classed as ‘persistent debt’.

A persistent credit card debt takes a long time to reduce because all that’s being paid off is the interest, or at most a very small part of the balance. Increasing your monthly payment means you’ll pay more off what you owe, so you’ll clear the balance quicker.

The Financial Conduct Authority has ruled that all customers who’ve been paying more in interest and charges than the balance for 18 months or more should look to increase their payments. The sooner you deal with persistent debt, the less stress and more progress you’ll see in the long term.

If you’d like some advice on persistent debt over the telephone, please call StepChange Debt Charity on 0300 303 2517. We’re available Monday to Friday 9am to 5pm.

How long will it take to pay my credit card off?

Let’s say that you owe £2967 on a credit card. The graphic below tells you how long it could take you to pay off this balance by only paying the minimum. It can also tell you how quickly you could pay the debt off by increasing your monthly repayment.

By repaying more each month, you could dramatically reduce your credit card balance and save money and time. How much you need to pay depends on your interest rate. You also need to understand how much you can afford before committing to an increased amount each month.

(please note: these figures are based on estimates and can vary depending on your interest rate).

What if I don’t increase my payments?

You can either increase the payments yourself, or your creditor may increase them, but ultimately they’ll need to increase one way or another.

If you continue to make nine further minimum payments after receiving your persistent debt letter, you’ll get another reminder to pay more to your credit card balance.

If you continue to make a further nine minimum payments (eighteen in total) after receiving your letter, then your card provider will look at ways to help you pay off your balance within three to four years. They could:

Put you on an ‘increased payment plan’ to clear your card

Look at other forms of credit which could help you pay the debt off

Reduce your interest rate and suspend your card

Some credit card companies are changing their terms and conditions (T&C’s) to increase the minimum payment in order to get customers out of persistent debt. If this happens to you, please be aware that if you don’t pay the increased amount each month you will be in breach of your T&Cs which could result in additional charges being applied and they may even suspend your card.

How can I get out of persistent debt?

By understanding your budget, you’ll know where you can cut back on spending. You can also start thinking about how much of the money you’ve saved can go towards getting you out of debt.

Visit the link below, and you’ll find a budgeting sheet that you can download, print and use to put your own budget together. You can download it as a PDF or Excel:

I can’t increase my credit card repayments at the moment!

When you filled in your budget you may have found that you’ll struggle to pay your other bills and debts when your credit card repayments increase. But that’s understandable: only being able to pay the minimum can be a sign that you’re struggling financially.

We provide free and confidential advice to thousands of people struggling to repay their credit cards, loans and other bills. We’ll look at your whole situation and give you information on how best to deal with any debts you’ve got.

If you’d like some advice on persistent debt over the telephone, please call StepChange Debt Charity on 0300 303 2517. We’re available Monday to Friday 9am to 5pm.

If you’re unsure whether or not you need debt advice, our 60-second debt test can tell you in just a few minutes.

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